Priority Sector Lending
Priority Sector Lending (PSL) is a very important rule made by the Reserve Bank of India (RBI). Under this rule, the RBI tells commercial banks that they must provide a specific portion of their total loans to certain sectors of the economy. These sectors are called 'Priority Sectors' because they are vital for the country's overall development but often find it hard to get money from big banks. The main objective of PSL is to ensure that credit flows to the grassroot level.
Concepts (3)
ANBC is the total amount of money a bank has available for lending after making certain technical deductions required by the RBI. It is the base number used to calculate the 40% or 75% PSL targets.
ANBC is the total amount of money a bank has available for lending after making certain technical deductions required by the RBI. It is the base number used to calculate the 40% or 75% PSL targets. For example, if a bank has an ANBC of ₹100 crore, it must ensure at least ₹40 crore goes to priority sectors. It includes the bank's total loans and certain investments in bonds.
PSLCs are a tool that allows banks to meet their lending targets through a market mechanism. If Bank A has lent more than its 40% target, it can sell the excess as a 'certificate' to Bank B, which has failed to meet its target.
PSLCs are a tool that allows banks to meet their lending targets through a market mechanism. If Bank A has lent more than its 40% target, it can sell the excess as a 'certificate' to Bank B, which has failed to meet its target. Bank B pays a fee to Bank A. This helps the banking system achieve the overall goal of lending to the poor while allowing individual banks to manage their portfolios efficiently.
This is a PSL category that covers loans for building essential public services. It includes loans for building schools, health care facilities, drinking water plants, and sanitation facilities (like toilets) in certain areas.
This is a PSL category that covers loans for building essential public services. It includes loans for building schools, health care facilities, drinking water plants, and sanitation facilities (like toilets) in certain areas. For example, a bank loan given to a private entity to build a hospital in a small town would count under this category, subject to a limit of ₹5 crore per borrower.
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Start Lesson: Adjusted Net Bank Credit (ANBC)